Mamma Mia! Sweden’s Remarkable Rise in Economic Freedom

A member of celebrated Swedish pop group ABBA recently made this confession about the group’s signature bell bottoms and platform heels: “[W]e looked like nuts in those years. Nobody can have been as badly dressed on stage as we were.” It turns out that ABBA’s unique fashion choices were partially due to Swedish tax code.

According to ABBA: The Official Photo Book, “[T]he band’s style was influenced in part by laws that allowed the cost of outfits to be deducted against tax—so long as the costumes were so outrageous they could not possibly be worn on the street.”

Sweden’s tax policies have changed a great deal since the late 1970s and early 1980s, when ABBA was at the height of its popularity. The country eliminated the inheritance tax in 2005, the wealth tax in 2007, and taxes on residential property in 2008.

As pointed out by C. Fred Bergsten of the Peterson Institute for International Economics, “[Sweden] cut marginal tax rates and simplified its tax code so much that nearly two-thirds of Swedes simply confirm by phone that the declaration automatically prepared for them by the tax authorities is correct.” This Nordic country known for ABBA and IKEA has also cut its corporate tax rate to 22 percent.

As documented in the Index of Economic Freedom, Sweden has measurably improved economic freedom over the past 20 years and has dramatically narrowed the gap with America, where economic freedom has been declining at an alarming rate.

It’s no surprise that Sweden has shown enviable economic resilience, while America’s entrepreneurial dynamism is on virtual life support due to the big-government policies of the Obama Administration.

Anthony B. Kim researches international economic issues at The Heritage Foundation, with a strong focus on economic freedom. Kim is the research manager of the Index of Economic Freedom, the flagship product of the Heritage Foundation in partnership with The Wall Street Journal. Read his research.

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